Generic drugs getting cheaper at Wal-Mart
No. 1 retailer launches program selling nearly 300 common medicines for as low as $4.
By Parija B. Kavilanz, staff writer

NEW YORK (CNNMoney) -- Wal-Mart announced Thursday a pilot program in Florida to sell about 300 generic prescription drugs for as low as $4 for a 30-day supply.

The program will be available to both insured and uninsured consumers, and will cover 291 generic medicines for things like allergies, high cholesterol, high blood pressure and diabetes.

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Some antibiotics, antidepressants, antipsychotics and prescription vitamins are also covered under the new plan, the world's largest retailer said.

The company said it would soon run radio and newspapers ads listing drugs included in the program.

The program, due to start Friday, will be available to customers and employees at 65 Wal-Mart stores, Wal-Mart neighborhood market stores and Sam's Club pharmacies in the Tampa Bay, Fla., area. The company hopes to expand the program to its 3,900 pharmacies nationwide in January 2007.

In a conference call with reporters, Bill Simon, an executive vice president in Wal-Mart's pharmacy business, estimated that saving to customers would range from 16 to 67 percent.

For example, he said, buying a 30-day supply of the diabetes drug Metformin for $4 is nearly 50 percent less than the cost of the brand name version of the drug.

And a 30-day supply of a brand name blood-pressure drug that typically costs $12 would save customers $96 a year if they buy the generic, Lisinopril, for $4, he said. Once the 30 days are up, Simon said customers can renew the plan for another 30 days for as long as they need the prescription.

The $4 pricing will be available to all pharmacy customers with a doctor's prescription that can be filled with a covered generic medicine.

For customers with a $10 prescription drug copay on their medical coverage, Wal-Mart will only charge the $4, Simon said.

He declined to say if the program would help boost Wal-Mart's share of the nation's highly competitive pharmacy business. The retailer does not disclose those numbers.

But he did reveal that the company was in talks to partner with 30 generic drugmakers ahead of an expanded rollout. Simon said Wal-Mart planned to keep prices for these products low by leveraging the retailer's size. And it plans to boost pharmacy staffing as it rolls out the program.

"This move is possibly the most forceful supply chain move by Wal-Mart in years, since their final retail pricing for many generics will beat the market prices at other pharmacy counters," Richard Hastings, senior retail analyst with Bernard Sands, wrote in a note Thursday.

Hastings said that while big drugstore chains, Walgreen, CVS and Rite Aid will probably respond to Wal-Mart's move, smaller prescription drug buyers, like supermarket chains that offer pharmacy services, could see profits from medicines come under pressure.

On Wall Street, investors were betting that Wal-Mart's new plan would hurt other drugstore chains. Shares of Walgreen (down $3.48 to $46.47, Charts),CVS (Charts) and Rite Aid (Charts) all tumbled following Wal-Mart's announcement.

Wal-Mart shares edged lower on the New York Stock Exchange.

"From an earnings perspective, this should be a neutral event for Wal-Mart," Hastings said. "It could improve customer loyalty and shopper traffic over the long term. The key for Wal-Mart is to get customers in, and keep them shopping in other departments. We'll wait and see if this works, but it will take up to two years to know if this has helped."

Wal-Mart (Charts), which has been the target of critics who complain that its health insurance is out of reach for many of its 1.3 million U.S. employees, has in the past year introduced several programs to improve its benefits for workers.

In April, the company extended insurance coverage to the children of part-time workers and started a benefit plan with monthly premiums as low as $11.

Wal-Mart said the program will help alleviate a major challenge for seniors who have fallen into the "doughnut hole" coverage gap in their Medicare Part D prescription drug plans and now find themselves responsible for paying 100 percent of their prescription medicine costs.

At least one public interest group called Wal-Mart's drug pricing initiative a "step in the right direction."

"These lower prices will give consumers a break from the outrageous cost of healthcare in this country," said Emily Clayton, healthcare advocate with the California Public Interest Research Group (CALPIRG).

"Obviously this plan is only part of the bigger healthcare problem. In order to get the drugs at whatever the price, people first have to go to the doctor to get the prescription. This is the biggest cost of the system, especially for the uninsured," Clayton said.

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